Should You Buy CSSC (Hong Kong) Shipping Company Limited (HKG:3877) For Its Upcoming Dividend?

CSSC (Hong Kong) Shipping Company Limited (HKG:3877) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase CSSC (Hong Kong) Shipping's shares before the 17th of October to receive the dividend, which will be paid on the 27th of October.

The company's next dividend payment will be HK$0.03 per share, and in the last 12 months, the company paid a total of HK$0.10 per share. Based on the last year's worth of payments, CSSC (Hong Kong) Shipping has a trailing yield of 7.2% on the current stock price of HK$1.39. If you buy this business for its dividend, you should have an idea of whether CSSC (Hong Kong) Shipping's dividend is reliable and sustainable. So we need to investigate whether CSSC (Hong Kong) Shipping can afford its dividend, and if the dividend could grow.

View our latest analysis for CSSC (Hong Kong) Shipping

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see CSSC (Hong Kong) Shipping paying out a modest 32% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, CSSC (Hong Kong) Shipping's earnings per share have been growing at 19% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. CSSC (Hong Kong) Shipping has delivered an average of 14% per year annual increase in its dividend, based on the past four years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is CSSC (Hong Kong) Shipping worth buying for its dividend? Companies like CSSC (Hong Kong) Shipping that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. CSSC (Hong Kong) Shipping ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

In light of that, while CSSC (Hong Kong) Shipping has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 2 warning signs we've spotted with CSSC (Hong Kong) Shipping (including 1 which makes us a bit uncomfortable).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.